UPI

UPI, the Unified Payments Interface, is India's public system that moves money from one bank account to another within seconds. You do not need a card, and no card network is involved. UPI is run by the National Payments Corporation of India (NPCI), an organisation set up by India's banks with the RBI's support.

Here is how a UPI payment works. Every bank account linked to UPI has a UPI ID, an address such as name@bank that points to that account. The payer opens a UPI app and scans a QR code or types the payee's UPI ID. The payer types the amount and the UPI PIN. The app sends the request through UPI to the payer's bank. The payer's bank checks the PIN and the balance, and debits the payer's account. UPI then tells the payee's bank to credit the payee's account. All of this takes a few seconds.

Inside each bank, a UPI switch receives every UPI request and passes it to the right system. The banks still settle with each other later. Several times a day, NPCI adds up what each bank owes every other bank, and only that net amount moves between them. You do not see this step. For you, the money has already arrived.

Take, for example, a vegetable seller with a printed QR code. A customer scans it and pays ₹60, and a soundbox beside the code announces the amount, so the seller does not have to check a phone.

Consider four friends who split a dinner bill. Each one sends their part to the friend who paid, using only that friend's phone number or UPI ID.

Say a company has to pay 2,000 delivery riders every week. A payouts platform sends each rider's earnings to the rider's bank account by UPI, in one batch.

How is UPI different from a card payment? A card payment travels through a card network, and the money moves between the banks at the end of the day. This is described in authorisation and settlement. A UPI payment moves the money between the two bank accounts in seconds. Other countries are now building similar real-time systems, and some are linking them to UPI.